“Covered Write”: You are bullish on GBPUSD, and have been holding a long spot position that is already profitable. The spot is at 1.5985 and you would be happy to sell at 1.6100. You have a choice: Leaving a sell limit order at 1.6100. If the spot rises to that level, your order is filled and your profit is locked in. If the spot never reaches that level, you remain long.

Sell a six week Call Option struck at 1.6100 and get paid 73 pips. If the spot is above 1.6100 at the expiration of the option, you will be effectively “called out” of your spot position. If the spot is lower than 1.6100, you remain long. In either case, you keep the premium of 73 pips, which means you are better off by 73 pips than had you just left a sell order.

When is options trading worse than leaving a sell order? If spot rallies above 1.6100 and then drops back down again, before expiration, the spot order would have been filled, while the option seller would still have his spot (and option) position. So there is a time element to the trade. But for 73 pips, the market is compensating for that risk. And the option seller can always decide to close his position at any time.